GoPro (GPRO) has been the ultimate bull killer. The once-beloved momentum stock is now the bane of many an investor. As of last week, GoPro stock had fallen a harrowing 88% from its peak in a mere 16 months.
Since August, the flight path of GPRO stock has been that of an ACME anvil. The one-way plunge has given little reprieve to shareholders hoping for some type of end to the pain.
Recent price action, however, is starting to look bullish. And that’s saying something. It’s been many moons since GoPro stock watchers have been able to spot anything remotely constructive.
For starters, GoPro stock price has rebounded quite nicely after posting its first quarterly loss since becoming a public company in June 2014. In true efficient market manner, traders had already priced in the earnings swoon (a 60% axing over the past quarter will do that to a stock), creating a true sell-the-rumor-buy-the-news reaction.
Since opening at $9.13 following the Feb. 4 announcement, GPRO stock has climbed 38% to current levels around $12.60, thanks partly to Wednesday’s 9% bounce .
And while the stock has much work to do before it looks remotely bullish on a longer-term time frame, in the short run GoPro stock looks rather “bottom-y”.
A Heroic GoPro Stock Trade
Tactical traders should look to play the breakout over near-term resistance at $11.90. If the bulls press their advantage here, the stock could rally back to $14.50 on a retest of the declining 50-day moving average. While the cheap price tag of GPRO makes it a logical long stock candidate, those penny pinchers unwilling to dole out their dough unnecessarily might consider snatching up GPRO call options.
Buy the April $11 call for $1.95. The max loss is limited to the initial $1.95 debit and will be forfeited if GoPro stock sits below $11 at expiration. I suggest, however, bailing if GPRO stock price falls below near-term support at $10. Such a downturn would invalidate the breakout attempt warranting a swift exit to minimize loss.
The reward is unlimited, allowing unfettered participation on any further upside in the stock.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
